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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of AZZ Incorporated (NYSE:AZZ).
Is AZZ a good stock to buy now? AZZ Incorporated (NYSE:AZZ) has experienced a decrease in hedge fund interest in recent months. AZZ Incorporated (NYSE:AZZ) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that AZZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's review the recent hedge fund action surrounding AZZ Incorporated (NYSE:AZZ).
Do Hedge Funds Think AZZ Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in AZZ a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AZZ Incorporated (NYSE:AZZ) was held by GAMCO Investors, which reported holding $18.1 million worth of stock at the end of September. It was followed by Cove Street Capital with a $12.2 million position. Other investors bullish on the company included Arrowstreet Capital, Engine Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to AZZ Incorporated (NYSE:AZZ), around 3.28% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, dishing out 2.57 percent of its 13F equity portfolio to AZZ.
Seeing as AZZ Incorporated (NYSE:AZZ) has faced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies who sold off their full holdings heading into Q4. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $1.9 million in stock. Greg Eisner's fund, Engineers Gate Manager, also said goodbye to its stock, about $1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let's check out hedge fund activity in other stocks similar to AZZ Incorporated (NYSE:AZZ). We will take a look at Gossamer Bio, Inc. (NASDAQ:GOSS), QAD Inc. (NASDAQ:QADB), Celestica Inc. (NYSE:CLS), Amphastar Pharmaceuticals Inc (NASDAQ:AMPH), istar Inc (NYSE:STAR), Employers Holdings, Inc. (NYSE:EIG), and DHT Holdings Inc (NYSE:DHT). This group of stocks' market valuations match AZZ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOSS,21,196663,2 QADB,1,752,0 CLS,15,87990,4 AMPH,8,16840,-1 STAR,14,102800,1 EIG,12,52197,0 DHT,24,129282,6 Average,13.6,83789,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $66 million in AZZ's case. DHT Holdings Inc (NYSE:DHT) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADB) is the least popular one with only 1 bullish hedge fund positions. AZZ Incorporated (NYSE:AZZ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AZZ is 52.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AZZ as the stock returned 37% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.